Formula
ROA = (Net Income / Total Assets) × 100
Calculation Example
If a company has $2,000,000 in total assets and earns $200,000 in net income, ROA = (200,000 / 2,000,000) × 100 = 10%
Data Source
Financial reports, balance sheets, accounting records
Tracking Frequency
Quarterly, Annually
Optimal Value
Higher is better, indicating efficient asset utilization.
Minimum Acceptable Value
A very low ROA suggests ineffective use of assets.
Benchmark
Banking industry ~1-2%, Manufacturing ~5-10%, Tech ~10-15%
Recommended Chart Type
Line chart (to track trends), Bar chart (to compare across industries)
How It Appears in Reports
Displayed as a percentage in financial reports to evaluate asset efficiency.
Why Is This KPI Important?
Shows how well a company converts assets into profits, helping in capital allocation.
Typical Problems and Limitations
ROA varies greatly by industry, does not consider asset depreciation.
Actions for Poor Results
Improve asset utilization, optimize investment in capital expenditures.
Related KPIs
Return on Investment (ROI), Return on Equity (ROE), Net Profit Margin
Real-Life Examples
A manufacturing company improved ROA by automating processes, reducing costs by 15%.
Most Common Mistakes
Comparing ROA across industries without considering asset intensity.
